CliffordK

I've occasionally received bulk packaged chain and cassettes. I think just about every other item from a major vendor has come in a box, although I've noted occasionally seeing "OEM" listed items for sale without questioning the source.

Shimano could easily either put items in white boxes or bulk packaging for OEM use. Even mark the boxes "Not for retail sale". Could they make OEM products different, for example not including precut cables with OEM shifters?

If OEM pricing is deemed a problem, then simply either level out the prices between OEM and wholesale, or conduct random sting operations to enforce supply chains. Pantographing?

indyfabz

Will you now enjoy cycling less?

livedarklions

It's a bit more involved than that--it's a resale price maintenance scheme, which is usually legal in the U.S., but can be illegal if it's anti-competitive. Shimano's huge market share basically is enabling competing retailers to price fix in a manner that could be argued to be harmful to the consumer.

Generally, the bigger the market share, the more careful you have to be about arrangements like this.

Sy Reene

So while I realize this conversation started out about Shimano & CRC, what accounts for the huge (70% difference on some Vittoria tires) we see between US etailers and LBS shops on all variety of products? It's not just drivetrains where we see cost differences; someone else referenced Thompson seatposts or somesuch, made 4 miles from their home in the US, costing more locally than after it's shipped all the way to the UK and then back again.

Have the LBS shops ever tried to establish a independent purchasing consortium entity, that would aggregate all orders to negotiate with the manufacturers? ie. kinda like collective bargaining. This is/was how in the past some smaller appliance stores (AC units, microwaves etc) could survive against the BestBuys, at least from standpoint of keeping the products at a comparable retail price to consumers.

CliffordK

Several companies are enforcing MAPs (Minimum Advertised Prices).

For whatever reason, the policies are considered "legal" in the USA, in part because one can sell items for any price one wishes. One just can't advertise the prices, which makes little sense in a competitive internet marketplace.

The MAPs are also driven by the manufacturer and wholesalers, rather than the retailer. So, it isn't an agreement among vendors to artificially raise prices.

Another thing that Shimano (and perhaps other bicycle vendors) is doing is refusing to sell to businesses they deem to be 100% online. I.E. refusing to deal with home businesses and tiny start-up businesses. Hard to run a business when one can't buy product, or must buy it at retail prices for resale at higher retail prices.

Psimet2001 

Yes there have been efforts but as you can easily see this industry is fueled by people with passion - not business sense. They do not have a direct motivation to work together. Whats more the whole distribution model was built at a time when you weren't able to drop ship around the world in a day or two and OEM's didn't have the staff or technology or desire to handle direct sales.

All of that has changes. What's more likely to happen is OEM direct sales to the public - not better purchasing from the shops.

Some shops have gotten better at purchasing - what's where Universal cycles came for example. Many of us go manufacturer direct fro product and private label, etc.

Again though - the future is not better run shops. It's shops that you go to because of service or cycling community culture (coffee, baked good, watch a race, listen to a speaker, group rides, fondos, etc) - not a place to go and get the latest and greatest tire. That's not our role anymore.

Psimet2001 

They most definitely don't do the last bit.

...and yes -

now you know why the whole US industry did a collective sigh of relief when they announced this. It's not hard its simply impossible. whats more you are really just dragged over the coals by the buying public (you guys). "You're just greedy or simply too stupid and must be doing something wrong".... to the contrary - Shimano was/is but we get the blame. :shrug:

Psimet2001 

It's funny because with they types of enthusiasts that come to forums like this I can truly believe the answer to that is yes. Few other hobbies and industries are made up of so many highly educated and mid to upper class clientele that are as amazingly fixated on $20-$40. Don't bat an eye at tipping 20% or throwing $200 in a community fund raiser but feel robbed at a shop if they charge - god forbid - MSRP.

To the extent that they derive a weird sort of pleasure at seeing actual local neighbors that own businesses in their community go out of business. It's really messed up when you really think about it. It's like people just ignore stuff like what's happened in Detroit. All in the name of cheaper parts to have for the product most of society regards as a child's toy.

CliffordK

I think they have. They're called "Middle-Men", and end up creating higher markups.

I'm surprised that a company like Nashbar/Performance wasn't able to leverage their buying potential to undercut the competition.

I have to wonder if we've had a long slow slide to get to where we are, starting with the early mail order companies with printed catalogs, bike-ecology, Nashbar, etc.

The bike stores, rather than trying to figure out how to re-capture the lost catalog sales, just ignored them. Then slowly lost one sale after another. Then the internet came along. Not too much of a ripple in the 90's. But, then a bigger splash in the early 2000's. Followed by a Tsunami in the 2010's. Sink or swim, and so many stores never learned to swim.

I have to think the bike shops do ok with things like tire sales, but even those are likely suffering, especially if they can't stock the selection their customer base demands.

The shops likely install a few groupsets in shop, but are rapidly loosing 99% of the groupset sales to walk-in customers.

And, what a tangled web we get as companies like Shimano and Campagnolo try to push forward with "Progress", while customers just want to maintain their aging bicycles with the parts they came with.

If Shimano sells 10 different groupsets:

Dura Ace, Ultegra, 105, Tiagra, Claris, Sora, M9000, M8000, M7000, Alivio... I'm sure I missed a few. Is Shimano still selling 6800 & R8000?

Anyway, for a small shop to buy say 10 of each (to get bulk discounts), one suddenly has 100+ groupsets on the shelf. They have to move a lot of them out the door to even make that feasible.

Personally, I've always liked to do "window shopping". For bike stuff, it seems like a shop only is selling what they have in the display cases. It takes a lot of space to properly display all those parts and groupsets.

Oh, and everything has moved to pre-packaged bikes. Don't blame the bike shops for TREK, Cannondale, & Etc selling all their bikes pre-assembled, one-size-fits-all.

In fact, the local bike shops likely move a lot more groupsets than one gives them credit for, just they all came into and left the shop attached to bicycles.

CliffordK

Cyclists cover a range of people from the street bums to millionaires.

Many cyclists, and cycle commuters/tourists are very frugal.

I think there is a whole range of people that would be called frugal millionaires. They have some savings, but are very frugal with it. They have a fair amount of money in property, or in the bank, but have gotten there by saving $1 at a time.

I for one believe that a system is fundamentally broken if one company buys at wholesale. Marks it up, and sells it. Then the next company complains that they can't even get wholesale prices that match the first company's retail prices.

Then you wish to blame the second company not getting good wholesale prices on the consumers.

If Tariffs are the problem, then blame the governments.

Oh, and why does Jiffy Lube thrive, when all it takes is a few minutes to pull an oil drain plug, drain the oil, put it all back together and refill?

JonathanGennick 

The possibility is real. Higher costs do have their impact, and much of my enjoyment derives from a steady flow of parts and supplies.

livedarklions

Like I said, generally MAPs are legal in the U.S. with some exceptions. The case law is that they're illegal if they violate "rules of reason"--in other words, if they're really designed to harm consumers by limiting competition. Just because there are others involved doesn't mean that the retailers aren't acting to fix prices, it's just that they couldn't enforce it without Shimano.

I'm not saying it would be a simple case (they never are), but there are a lot of other actors who might benefit from going after Shimano.

Dave Mayer

Wow: this is huge news.

I hadn't bought a lot from Chain Reaction in the past, but it was good to know that this venue was available to bypass our domestic price-fixing cartels. North American pricing is higher simply because we have a greater ability to pay. I'm sure, as with OPEC and other cartels, that there are a legion of Harvard-trained economists working on the problem of regional pricing so as to maximize long-term profitability. Nash and Cournot equilibrium. Challenging problem is to fix prices at a certain level so as to maximize market penetration, and at the same time manage grey market leakage, and your monopoly being eaten away by small-fry competition.

So I just completed a huge order from CR for Shimano consumables such as cassettes, rings and chains. Biggest online order ever. A couple of years worth of stuff. Plus my riding pals, divided up into reasonably-sized parcels so as not to incur the attention of customs.

We may finally pull the plug on some Di2 gruppos for bike builds. All told, this announcement from Shimano may cost my little group 5-figures dollars worth of purchases from CR. Because January 1, no more Shimano; it's been swell.....

Which leads to the broader question as to why parts that are manufactured in Asia needlessly travel to the UK, to then travel to North America? It makes more sense for factory direct to cut out all of the middlemen, marketers, advertising, distributors etc. And my local shop who straight-faced swears that I need to buy a new bike because: "we cannot get 9-speed parts anymore", or "road bikes now only come with disks"....

Cyclist0108

I certainly can't pretend to speak for anyone else, but I would happily pay MSRP for parts and fair market value for labor at a LBS if they (a) used the parts I want, rather than stock they want to unload, and (b) installed them competently.

Unfortunately, (a) is often not the case, and (b) is a crap-shoot. I have no particular mechanical aptitude, and the money I have saved doing my own wrenching is likely cancelled by the $2- $3K I have had to invest in tools (not to mention my time). But more often than not, I feel like if I want it done right, with the parts that I want, I have to do it myself. Given all that, it is much easier to order the parts on line. (I justify Universal Cycles because it is the LBS for my kid at college, and I didn't mind spending some money at Chain Reaction Cycles, because it is in an area of Northern Ireland where my wife's family is located, and I like the idea of helping their economy a bit.) I had my bike built in my own zip code for about $7K, including MSRP on the parts. So I am not adverse to spending locally. I am adverse to paying for incompetent service and vastly over-priced plastic made-in-China bike frames, sold by bike shops that won't even provide employee health care until forced to do so.

CliffordK

They most definitely DO the last bit.

I tried to start a small wheel building company.

Got my business licenses lined up and paid for.
Got my equipment started.
Got a niche product that I wanted to build.
Was working my prototypes (now mostly complete).
Started some market research.

Went to Shimano to buy hubs, cassettes, and small parts.

NOPE

Ignored by DT (need to try them again, but not a peep). But, the hardest thing was an absolute refusal from Shimano to sell parts.

Went to a local bicycle wholesaler.

Asked about minimum order ($500 or $1000??? not that high). Met all the requirements... Cash in advance purchases.

NOPE.

They don't sell to small startup businesses.

Hard to get one's business running when one can't acquire the raw materials.

Oh, and you want me to support the small businesses that try to leverage themselves to prevent startups from starting in a completely different niche not competing with them.

Oh, and there is a reason why it had to come from Shimano. My parts list was so obscure, that not a single local business would have them in stock. We're talking about value added small manufacturing.

NOPE.

Psimet2001 

I honestly don't know a single shop around here that stocks a group or would unless they got it as a deal or it was a takeoff on something. As shops well sell lots of tires and tubes. I know that you specifically know this but in general people in this forum tend to forget that this enthusiast market is TINY compared to the bicycle market as a whole. I sell $20 tires and $5 tubes all day long. they aren't Vittoria, Conti, Michelin, Pirelli, etc... they are house branded Chen Shen/kenda/etc. I/We sell a ton of piece parts. Alivio derailleurs and MRP twist shifter all day long for good margins too. Those customers aren't shopping the internet for parts. They are coming in to get it fixed because they have other things to do and want to get back to that.

Groups? I don't even bother quoting anymore and wouldn't dream of ever stocking. No customer really comes in to talk about a new group. Especially not to buy. Yes, I miss the old days of lusting after a group in a display case but that is gone. Long gone.

We're speaking of the enthusiast market. That's the market that buys from PBK, Wiggle, CRC. The demographics of the enthusiast market is male, 20-55, college educated, white, earning $40k-$150k annually always outliers to both ends but this is a pretty easily defined sub market.

Let me be clear if I haven't been: I hate when people draw judgement on how others decide to spend their money. I have said as much many times. People do tend to read their own feelings into what I write. As i said I find it "funny" how our market spends. As in interesting. Whenever I hear people complain about how someone with money refuses to spend it on something others would easily ("That guy is penny wise but lb foolish") I always say, "rich don't get rich by spending their money."

see the change. It's a complaint to Shimano - but just revealing the facts to retail customers.

I don't understand where this interpretation comes from. If anyone is actually blaming customers then they either don't understand or just a luddite. All of us in the industry know and blame Shimano. 100%. This is their problem. We just have to deal with the fallout.

I am sure they do but honestly we lobbied as a industry about the China tarrifs as they WILL kill our industry and that has done absolutely nothing and won't. What serious government adult would ever give 2 craps about a tiny industry that works with kids toys?

Service industry - yeah we get it. I have been there since day one. Almost all others have seen the light and are in transition to it, in denial and are on their way out, or are simply waiting for the big OEM's to buy them out.

Psimet2001 

You know I went through all of that as well, right? It's frustrating but they will sell. You have to meet the requirements. What's more they were burned by so many enthusiasts who came up with a business license and claimed to have a plan but didn't have brick and mortar who just flipped parts that they had to do something.

I have been "blessed" with accounts and had them taken away for all of the reasons you cite above. Calls to account managers by my crying wife saying they were ruining us for no reason happened even.

What I took issue with in your statement was that you said they won't sell to internet only sellers. This is incorrect. It happens often. I was able to buy and have accounts when I was intenet only. There are usually different cost structures and they watch you like a hawk. the difference between this and your experience is that the internet only sellers they sell to have actual business brick and mortar. be it warehouses, office they rent, etc - they "exist" in these guys minds.

For everyone in this business it's just simply too risky for them to take a "chance" when that person doesn't seem to have any skin in the game (investment in infrastructure).

EDIT: Oh and again - don't know where you keep getting this "im asking you to visit local businesses that are against you...."

I must not be seeing what you're seeing. Buy what you want from whomever you want. If you want to go into business in this industry and be a competitor then do it. You have to jump through the same hurdles I have to. But I'll be damned if I am not going to complain about Shimano if you are able to get parts for less than I can. It is supposed to be about how we compete with each other.

As for DT - they won't talk unless you're buying at least 5,000 spokes per length or spending $4k or $5k minimum order. I don't even bother with them. They rely on Q. "Get a Q account" they say.

Psimet2001 

Yup - you're two things: a rarity as a customer. I have some that are similar to you. They are a pleasure to serve and I appreciate them and bust my ass to keep their business.

The second is you apparently live in a place with crappy shops. I can't fix that one for you but all I can say is high quality shops with knowledgeable people do still exist and they do know how to take care of you. if you don't have then no worries. If your shops are really that bad and there isn't a market locally that they serve well then they will disappear. That's how this works.....

.....the point of this though is that at least they had a chance to try and serve your needs.

Yeah I get customers who never ask for a price and then say, "Wow - thats a lot less than I was expecting" when I ring them up and then there are those that basically try and brain drain you to find out what they need to order without even asking if you can get the stuff for them for the same or better price than they can find online. You see - Shimano isn't everyone. We can actually compete on a lot of stuff. Some people will never know.

REDMASTA

I think it's fine, they are just protecting their brand and dealers from online sellers undercutting. If you think it's too expensive for what it is buy something else.

PepeM

Are you suggesting that some people might have to downgrade to Ultegra? The horror!

PepeM

So true.

'Getting a deal' seems to be the most important thing in the world.

Sy Reene

It's not the amount, it's the percentage. $75 conti GP4Ks (aka MSRP) at the LBS represent about a 100% upcharge over domestic online (to use one example where cost difference is in the $20-40 range). I think psychologically, many have an expectation that a retail store is going to cost more than online for the same product, but for run of the mill goods, and more mundane Amazon purchases, 30% is more typical. 50%+ differentials are just difficult to swallow.

Gresp15C

Just to make a contrast, I run a tiny, non bike related electronics business. I did all the same things, got my product designed, etc. When it was time to go into production, I found a printed circuit board house online, uploaded my design file, and...

YEP

Then I went to a parts distributor, chose my parts, entered my credit card, and...

YEP

Nobody has ever asked who I am, what I make, or how I'm going to sell it. Oddly enough the electronics business is more vibrant than the bike business. My impression is that Shimano could end all of this monkey business by just having transparent, consistent pricing. They have too much control over the bike business.

Do some people pay less than I do for parts? Sure. The distributor is up front about their volume pricing structure. There are lower cost distributors in China, but I value my time in terms of being able to get everything I need from one convenient supplier.

Psimet2001 

Just using this again to point out the thinking that I believe is the disconnect - There is no "upcharge" at the LBS. Call is semantics but i really feel this implies thinking that the LBS COULD have charged the same as the online guys. Up until now it just hasn't been possible.

Agreed that up until now the pricing difference is so large that it just seems irresponsible. It's what caused me to dig, get into the business and eventually figure a lot of this out. Just want to reiterate it's not an "upcharge" that the LBS is pulling. It's two completely different pricing and business platforms caused by the OEM. Not the result of bike shop pricing strategies.

base2 

It most certainly is distributors variable pricing based on account volume.

An anecdote: MudBay pets started in Olympia, Washington. When they opened a 2nd (or third...) store, they also opened a distribution business to negotiate bulk sales. They then ran their own truck between the stores. The cost savings enabled them to open more stores and stock them cheaper than each store ordering from a traditional distributor. It sounds like this is the model that Shimano Global will not allow.

Mudbay distributing controls the price to Mudbay retail.

In the pet industry, for the livelyhood of the industry, some distributorships flip the model upside down. They give preferential treatment to mom & pops. The effort on their part is just to keep accounts open. Pricing is often a result of the local distributor sales rep. This seems to be where Shimano USA is lacking. Soon they will not have Mom & Pops to sell to.

The value of a good or service is determined by the highest price people are willing to pay. Americans are viewed as more willing to pay more. Simple. The reality is: So long as international shipping remains less than the price difference between markets and the means exists for consumers to become informed of the price in other markets. Then informed consumers will be empowered to break the Shimano Global silo model of price structure.

The answer here is the national retail chains adopting the first Mudbay model, and/or for the survival of LBS'S, local distributors being allowed by Global to adopt the second model.

The times, they are a-changin'