swisscheese

I work in snowboard retail and margins are even larger, cost for most high priced items are 40-50% of MSRP. Smaller snowboard shops struggle with this margin, so i can imagine with 35% it's even harder to keep the lights on.

And as gsa103 mentioned you get the minimum pricing agreements which is really, really hard on smaller shops that have to compete with big chain shops purchasing power. I'd assume dealing with spec and trek its the same thing, but the shop I work at is not able to discount things when they want, it's decided by the manufacturer per a sales agreement.

So a local shop saying they can't change their price probably aren't lying, because 1. if they did they are coming closer to not profiting at all. and 2. Depending on the brand they literally are breaching contract if they discount.

Lanceoldstrong

Our local bike shop is not trying to rip us off.
They are trying to stay in business.

redfooj

It likely scales with MSRP.

If you take away the shop costs, their pre-tax profit probably isn't very healthy

rpenmanparker 

You are not getting it. There are other costs above the wholesale price of the bike. Sales margin and profit margin are two very different things. Profit margin for bikes is likely less than 10%. Rent, emplyee salaries, utilities, cost of money to buy stock, insurance...the list goes on and on. How can they ALL be sold much cheaper? How many do you have to sell to make a living wage? How many $400 bikes do you have to sell? How many $15,000 bikes is it even possible to sell? Get real.

PepeM

And we're not even considering the markup from the manufacturer! That's why I build my own bicycles, I refuse to let anyone make a living out of my purchases.

noodle soup

Do you build your own frames, and components?

thin_concrete

The best way to make a small fortune owning a bike shop is to start with a large fortune.

That's what they say about Formula 1, anyway!

birru

Yeah, screw this whole exchanging money for goods and services scam.

Maelochs

As far as I have ever heard (having owned businesses and having managed, and having actually learned a very small amount) one-third is about normal. There might be small variations for some products which are high-volume/disposable or exceedingly luxurious, but one-third is about standard for retail sales.

The store owner has to pay the employees, buy the merchandise, pay for the store, and pay him/herself enough to eat and pay rent. If it were your business, where would you scrimp?

Anyway, that's the markup all of us have been paying on just about everything just about all the time. Anyone who is outraged can simply stop buying things.

wheelreason

I'm going to deliberately not sell a single road bike this season, AND...
I'm going to go use the time to be extra attentive to the family that buys bikes for everyone, helmets, accessories and bike rack.

Now I have to go shift my pre season road $$.

indyfabz

I build my own golden yachts. You in the market for one?

RShantz

That return on new bike sales is very reasonable.


Also, think of the risk involved with owning a bike shop as your primary/sole source of income. How many shops are going out of business? I imagine their owners don't have other jobs or businesses just waiting for them if the bike shop fails.


I know the finances of one mid sized LBS pretty well. There's no way I'd be in that business for the relatively small amount of cash generated vs the long term risk in this industry.

MRT2

I think you are being too hard on retailers. As others have said, 35% markup is not unreasonable given their overhead. If you want to save money, you can always take your chances buying online.

Retoocs

I worked at bike shops back in college in the 90's. Mark ups on bikes haven't changed, 35% or so. Parts mark up was closer to 50%. Our operating cost was about 30%. When you look at a high end bike making thousands of dollars, keep in mind but shops don't sell that many of those. And the longer it sits in the store, the more money you lose in interests since Most inventory are bought on 30-90 day credit.

Most of the bikes sold are the cheap ones less than $400. A typical day, you may sell a bike or two. Few more on the weekends. Do you don't make much money if any on bikes.

If you have good and fast mechanics, you can make money on labor charges. But if you get slow mechanics working on something that turned out to be a pain, you lose money on the fixed labor charge.

You don't get rich owning bike shops. I still stop by the shop I used to work at. The owner is still driving the same car he had from the 90's.

redfooj

its a low margin business. probably the only ones highly profitable, to the well-capitalized sole owner, are the mega shops that get by through volume. like ole cheater mcarmstrong's shop in austin

Rollfast

I don't recommend emptying the Cutty Sark bottles too fast.

StanSeven

Excellent! Great perspective and information.

HazeT

Road Is Dead Episode 11 - Is The Bike Shop Dead Part I | The Bike Racing Community

psimet talked about it and gives a good insight on how the balance sheet for a bike store works.

gregf83 

To be fair, many have gotten used to not paying those markups. Computers used to be sold like bikes at brick and mortar stores until Dell came along and changed the distribution model. I'm travelling to Germany next month and will likely buy a Canyon bike which won't have any retail markup applied to it.

I don't envy LBS owners.

wheelreason

I don't know, some of us get to write off the week in Vegas, launder money, employ a few guys AND the dumb things make money to boot. And as icing on the cake, I get to chase roadies away...

MRT2

Good article. Makes me feel bad for the LBS owners.

DinoShepherd

Sounds like you should start an Eli.pen business because you've got it all figured out.

I mean nobody else wants into the market, but here you are wasting your time online when you could be a multimillionaire.

rms13

Unfortunately due to patents he can't do that. Monopoly leads to price gouging. Bike industry doesn't have that problem

gregf83 

They have a patent on their particular implementation but anyone can make a device that reliably delivers a consistent amount of epinephrine. It's just not easy nor quick to get a medical device developed and approved.

Fortunately (or unfortunately depending on your perspective) the FDA does not allow companies to take Garmin's approach and throw a new device over the wall and let the customers debug it.

rpenmanparker 

For the price they want for Epi pens, you would think it was a 20 year new drug development program. It's just adrenaline, not rocket science. It should cost about $50 max. The worst part is thst most of them expire unused and are just thrown away. Well, that is the best part too, I guess. But you get my point...I hope.