StanSeven

Most merchants don't think that way today. Cash is just another headache to deal with.

Bandera

The merchant pays a transaction fee to the CC issuer, it's losing a non-negotiable % on the transaction vs. Cash. That's money not in the bank or on the ledger.

As an aside I ask for 2% off any major purchase with a local merchant with cash payment, we both come out ahead.

-Bandera

leicanthrope

On the other hand, so few people pay in cash for large purchases these days that's it's likely to raise some flags in the merchant's mind as far as the risk of counterfeits go.

velociraptor

I'm gonna hazard a guess that you aren't familiar with the cashflow issues of most small independent retailers.

*taps index finger against nose*

I heard from a friend of a friend, who knows a girl who dated a guy, who's mom went to school with someone's roommate that once read about an internet course on business management, that there are a number of creative ways to write down inventory when one wants to transact... er... "under the table", so to speak.

You see, in a small business, the owner gets paid last. Sometimes not at all. Cash laid bare upon a table *might* present a welcome opportunity for some.

Or maybe not.

But it never hurts to stack the deck in your favor as much as possible when looking to conduct business with someone.

J. M. H. O.

StanSeven

You means ones that don't declare income and a step away from going out of business?

Bandera

The latest iteration of US currency is the most difficult to counterfeit in history.
That being said merchants are provided with technology to detect counterfeits by their bank.
Hand a register operator a $100 bill for a purchase and watch what they do before putting it in the till if you are interested.

Checks are a much greater fraud risk.
Retail ain't easy.....

-Bandera

CPcyclist

Keep in mind that $1300 bike has cost him in what he payed for it but also interest (likely bought on credit) and lost revenue from other missed sales because money was tied up in the bike. When you go in with a low offer don't expect the after sales tune-ups or other perks you wouldn't expect them in the secondary market which the book values being quoted are based on. And yes by all means get your accessories there are well though cut him some slack on those. There is not as much profit for an IBD as one think in sealing goods, service is a bit better.

StanSeven

What's funny is I recently bought a new bike - Cervelo C3. I called the store 2 hours away to see if my size was in stock. I had never been there before. They told me on the phone cash/check gets a 5% discount. So I drove two hours, saw the bike, said I'll take it and wrote a check. They didn't ask for ID and I left.

The only thing I can guess is the store feels bike customers are honest and never been stiffed before.

It was a nice experience.

Bandera

Good for you, everything is negotiable in retail with a local merchant.
The retailer most likely fed your check into the tech that their bank provided to prevent that flavor of fraud.
Merchants have good fraud-tech in all methods of payment today.

Win/win for honest transactions.

-Bandera

kbarch

I wouldn't second guess the shop owner as to why he might or might not take an offer of $700 or whatever, but yes, cash is motivating. The only thing you can do with a credit card sale is enter it in your books. You can do a lot more with cold, hard, cash money. If nothing else, you can save yourself a trip to the ATM/bank.

02Giant 

I believe the shop will not take $700-800 for the bike. I see it hanging there until an unknowing buyer walks in and thinks they are getting a deal on a $1300 bike for $1100.

My .02

RoadGuy

I can tell from the way people who are posting in this Thread are writing, that they do not, and have not ever owned a small business or operated one (full financial responsibility).

Cash has the lowest cost of processing and securing. Many banks handle credit card processing as well as cash (and other deposits) for businesses. Each form of asset being deposited has a different cost/charge for being handled by the Bank. It actually costs the Merchant money (a percentage) to deposit cash in the Bank, same as checks and credit cards. However, cash has the lowest cost to the Merchant.

When a Customer pays a Merchant in cash, the Merchant has more options than if he was being paid with checks or money orders, or credit/debit cards. Each of those requires more processing, more delay in getting the use of the funds, more costs, and more risks than cash.

As a Merchant, when paid in cash, I have the option of paying operating costs, or investing in merchandise, or holding the money. Holding cash doesn't cost the Merchant anything. Have you seen what it costs to keep money in the bank? You pay the bank to hold your money (the 1/2%-1% the Bank pays as Interest is less than inflation), while they charge you 15X to 20X to borrow the same money back.

There is nothing illegal about holding cash, and paying in cash. The Federal and State Governments don't like cash because it is harder to track (and they want their share of every dime) you come across.

If I pay for product with cash, I get a discount from the Vendor. If I buy on Credit (Net-30 to Net-90), I get a discount for paying before the payment is due (5%-10%). Incidentally, for my Net-30 Customers, I give the same discount that I get.

If a Customer pays me with a credit or debit card, I get to wait on pins and needles for a year or more to see if the customer decides to challenge the charge. 18 months after selling something, I could get a nasty letter from the bank informing me that the cardholder is disputing the charge, and now I've lost the merchandise, and service charges to be determined by the bank at a later date. In the mean time, I'm paying a monthly charge for the credit card service, plus a percentage of everything I sell on cards to the bank.

So, guess what form of payment I prefer?

softreset

Everything you've said here is super spot on. I don't have a lot of insight into the operational finances of the bike shop I work at but what I do aligns with everything you've said.

That being said, we've sat on bikes for quite a while if it means getting our money's worth. In the 3 years I've been at the shop we've never sold a bike for less than $100 over cost. Despite how many hours were spent trying to sell the bike, at a minimum there's a break even in putting the bike together and the mechanic's time/labor.

But I've definitely seen 3+ year old bikes sold at exactly cost or below it. Typically manufacturers have rules on a 1-2 year old bikes, unless they're no longer carrying the vendor. Obviously given the age of the bike that doesn't apply. But we've got 2012-2013 and 2013-2014 in our inventory right now as we're trying to make room for 2017s.

And our "get it out the door price" is still $100-$300 over cost.

RoadGuy

A shop that holds onto a 2013 model year bike to try to get $1100 on a $1300 bike will never get back what they have invested in the bike, no matter how long they wait for that "dream" customer.

That bike is almost four years old. By now, the shop owns that bike, regardless of whether they originally received it using "flooring" (someone else paid for the bike initially to get it into the shop, and would have been paid for the bike when it sold), or paid for it outright when it was delivered or on a Net-Account. That means that for the past four years, the shop has lost the cost of Interest on the money that the bike cost when it was brought in.

I don't know how much they paid for it. But let's assume 40% discount. $1300 X 40% = $520. Net cost at time of delivery $780, plus freight. What do you think about the cost of money? On a credit card, you might be paying $17%-20%. Let's say the shop gets a business loan at 10%, and let's figure simple Interest to make it easier to calculate and round-off. Age the loan four years. That's $78 + 8, $86 + 9, $94 + 10, and $104 + $11 OR $400.

So the cost of getting that bike into the shop and holding it for four years is about $1180. That's $80 more that the shop just sold it for. And that's not considering the cost of processing the payment for the bike (credit card 3% = $35, cash is 1%-2% = $12-$24).

As I wrote at the beginning of this post, a Loser for the Shop no matter what it does now.

EGBigelo

What about depreciation? If anything it's been a deduction on his taxes every year. The bike's value as far as the shop goes has to be pretty low by now, right?

wheelreason

Ya'll InterWeb Bike business experts are certainly entertaining....

rpenmanparker 

Shop may use a factor to buy the merchandise, but there is no way they are carrying the credit for years. That loan is paid off very fast.

RoadGuy

If the shop owner chose market value to value his inventory, he could have been depreciating the value of the bike over time in his inventory. When he sells the bike, he will have to show/report the amount he got (above the depreciated book value) for the bike as "recaptured", and pay tax based on the inventory gain.

RoadGuy

I was approached by Flooring/Factoring Companies (Finance Companies) several times about stocking my business using "Flooring/Factoring". Looking at the numbers, it's a sucker's bet. The Business loses control of it's finances when it agrees to Factoring. Basically, the Shop pays a percentage of the selling price to the Factoring Company to delay payment for the Inventory. The Shop has to pay for the merchandise within a certain period of time, whether the merchandise is sold or not (usually 30-90 days). While the Factoring Company owning the merchandise until it's paid for, it has no responsibility for the merchandise. If the stuff is lost, stolen, broken, or damaged, and unsellable, the Factory Company still gets paid full fee, plus the percentage. If the Buyer doesn't pay, the Factoring Company still gets paid. A Factoring Company is not much more than a Legal Loanshark, similar to a Payday Loan Company. Many Factoring Companies require the Shop to assign the shop's Receivables to the Factoring Company (see what I mean about losing control?).

I refused to use Factoring Companies because the Factoring Companies were looking to make more on each sale than I was making as the Shop Owner, with my shop assuming the risks of the transactions, while the Factoring Company would be guaranteed their money back plus a profit, no matter what happened to the sale or the merchandise.

Some Manufacturers have programs with Flooring Companies, so the shop get some period of time where the flooring is free (usually 15-45 days), afterwards if the goods are not sold, then the Flooring Company's costing rules apply. As a Business Owner, I made more money on each transaction if I used my own money to buy Net-30, and wait for the Customer to pay, than I would have gotten using a Flooring Company.

Putting Merchandise on the floor costs money, whether it's being paid for up front at time of delivery. being initially floored/factored, or whether the shop inventory is purchased and held by way of a bank loan. It all costs money. It's true that a bike sitting in inventory for four years has been paid for by the Shop for years (and the cost is being carried as part of the cost of the inventory or cost of doing business), BUT that bike is still costing the Shop additional money each day it remain unsold (lost opportunity to use that same money to buy merchandise that will sell), and will until the day it is rolled out, or broken up and thrown in the trash. Inventory Turns (how many times the money is rotated between inventory and cash) is the way that a business makes money. Dead inventory (four year old bikes) cost money. Inventory that turns is making money each time it turns, regardless of how much is made at each turn.

rpenmanparker 

Yep, that is factoring. And besides all the drawbacks it is a major "factor" (great pun, eh) in stocking retail stores. Merchandise on the floor is king, and for many stores with poor cash flow, factoring the goods is the only way to get them. Of course there is the possibility of the manufacturer/wholesaler acting as the factor for the transaction, that is providing extended payment terms for order for a price penalty. There is some of that going around too.

roadwarrior

Not if you know what you are doing.

EGBigelo

I went bike to the LBS and tried to strike a deal to no avail. $1,175. You read it right, $1,175. While I appreciate the mark down, that's just ridiculous. I politely declined and walked out, never to return. That place is a joke and it's not wonder why he has 3 year old bikes sitting around.

Maelochs

So, ride back on your new 2017 model and thank them for not selling, because you got the new bike for less than their three-year-old permanent display bike. just to be courteous, you know ....

Shuffleman

Most small business owners would prefer to be paid in cash for a multitude of reasons. I am guessing that INPD is correct, in that whatever the reason, it is not seeing the register.
To be fair it is not usually 3%. There are many different percentages paid and costs affiliated with taking a credit card. A LBS probably does not do the volume to get the best deals. They are probably paying close to 4.5% when you look at the cc fees in total.
OP, there really is no set rule with how you deal with the negotiation. All you can do is be friendly and make the offer. The owner has to know his market well enough to know what he can get for the bike. At the same time, you have to know the value of the bike well enough to know what you would pay for it. Figure out what you are willing to pay and communicate. The worst thing that he can do is say No.

RPK79

You don't depreciate inventory.